The global subscription industry continues to grow with a projected market value of $1.5 trillion by 2025, but one challenge continues to plague many leading subscription companies—subscriber churn. The complexities of recurring billing and payments can leave some companies with a proverbial "leaky bucket," leaving a projected estimate of $129 billion on the table from involuntary churn alone in 2025.

Involuntary churn is when a subscription payment stops due to a payment error—an expired or reported lost card, gateway failure, or one of 2,000 additional reasons. It is one of the top, but manageable, challenges facing the subscription industry today. For even the largest subscription businesses, this can result in significant lost recurring revenue, lost subscribers, and a poor brand experience.

To understand the potential economic impact of involuntary churn, Recurly analyzed billions of data points to identify its impact on the industry overall. The analysis shows that inadequate churn management can collectively lead to an estimated $129 billion loss when looking at this $1.5 trillion industry. This analysis was derived from the average 8.6% revenue lift that subscription businesses experience when implementing Recurly's industry-leading, data-driven churn management solutions.

"Subscriber churn is the enemy of every brand we speak to. Many businesses have basic, manual solutions in place to manage churn, specifically involuntary, but they don't realize how much they can move the needle with a better strategy and automated tools," said Jonas Flodh, CPO at Recurly. "Recurly is the only company that addresses churn pre- and post-transaction, leveraging machine learning and data models trained for over a decade. We have the smartest churn management solutions in the industry, based on vast amounts of data powering our churn algorithms. Some of our customers have reduced churn to as low as 1%. That translates to material revenue retention and happier subscribers."

To minimize the risk of lost revenue, subscription businesses must apply both proactive and reactive techniques that deploy a full array of strategies, including advanced automation and machine learning to remove friction in the payment experience. Some subscription platforms leverage static rules, but Recurly combines years of data with AI-powered transaction retry models to refine and improve—even optimizing for a specific data set can optimize automated retries.

Since Recurly's churn management solutions help prevent failure before it happens, subscription companies can retain revenue with a 96% average renewal invoice paid rate, while subscribers have a better consumer experience, especially when paired with other best practices like backup payment methods, dynamic gateway routing, and customized dunning strategies. To see what revenue your business may be losing, check out this recovered revenue calculator, and reserve your copy of the Recurly report, The 2024 State of Subscriptions today.